Israeli Economy: Not Just Black and White

January 18, 2012 |

The world relates to Israel as a land of conflict, and the common perception is that threats by Israel’s neighbors are the country’s greatest concern. This may be partly true, but recent events clearly demonstrate that the country’s domestic battles are just as dangerous to Israel’s survival. In recent months, Israeli society is experiencing social and economic turbulence that crystallizes the fissures within.

Israel’s economy is doing great. No Israeli bank has collapsed and none needed bailouts. We weren’t part of the housing and credit disasters, and most important, our unemployment rate is around 5 percent, compared to much higher numbers in other advanced countries. We are also enjoying a booming high-tech sector, advanced medical discoveries, impressive agricultural achievements, world- recognized patents and high academic achievement rates, all of which have given Israel the moniker of a “Start-Up Nation.”

So how can that tale of shining success jibe with the recent disturbing statistics regarding Israel’s standard of living? The latest reports show that the standard of living in Israel has been retreating since the 1970s relative to leading Western nations. These reports claim that about 25 percent of Israelis live in poverty–15.2 percent of Jewish families and 53.5 percent of Arab families are defined as poor. One of every three Israeli children is classified as poor. How can we explain these gloomy statistics next to Israel’s bright economic status? Which is true?

The reality in Israel, as in many other countries, is that it takes more than just two colors to portray the reality. The numbers are based on income tax reports, and many people report no income. They live and work in the gray economy, the one that doesn’t pay taxes. Israeli Arabs and Haredi (ultra-Orthodox) Jews are the majority of people classified as poor, and both these communities have low tax-collection rates. Unemployment carries no stigma among Haredim and actually is supported by the government’s special scholarship fund, which allows married Haredi men to continue their studies with government funds.

Israel’s generous social welfare system risks encouraging some to stay home rather than join the work force. Israel brings many thousands of foreign workers into the country to work in agriculture and to care for the elderly while we have hundreds of thousands of citizens out of work collecting unemployment benefits. The paradox between the rising rate of poverty and the wonders of Israel’s high-tech sector can also be explained by the fact that this sector enjoys preferential regulation and low taxes, whereas other sectors, which employ the majority of Israeli workers, don’t enjoy any of these benefits. That has created a small group of wealthy, successful Israelis who seem to be living in a bubble, cut off from the rest of the country.

Rising unemployment, inequality in tax payments, and a heavier burden on some citizens than on others, led to this summer’s social protests, demonstrations, and calls for action. Still, it has to be acknowledged, and emphasized again and again, that the state of Israel is living proof of one of the biggest miracles of our times. We face challenges, threats, and realities that no other nation does. In just 63 years the Jewish world created a wonderful, strong, developed country, a country that throughout its survival (which is still questioned by our enemies) invested major funds in three areas: absorption, physically building a state, and defending it. This is our story, a story we should embrace, be proud of, share with the world, and, at times, deal with conflict-filled chapters